Welcomed by developers who hope to keep gang-style scribblings off the walls of the derelict Pan Pacific Auditorium, a group of teen-agers has covered much of the building with the lush colors and dynamic lettering of graffiti art.

The spray-can illustrations include self-portraits, movie themes and expressions of thanks to Somerset Hotels, which intends to cover it all up when renovation of the building begins in October.

Plans call for a hotel and cinematheque inside the 50-year-old structure, which was the site of political conventions, ice shows and the West Coast debut of Elvis Presley before it closed in 1972.

Since then there have been at least two fires at the building, which was placed on the National Register of Historic Places in 1978 to preserve its 1930s-style architectural style, known as Streamline Moderne.

Somerset employees said it had become the haunt of homeless people and gang members when they took it over in January.

"The head of our security group decided the best thing to do was to co-opt these gangs and say, 'If you agree to work in a controlled fashion, we'll let you go ahead, because basically it's going to be totally redone anyway,' " said Tom Childers, a partner in the development firm.

"It's turned out fairly well, if you don't mind graffiti," he said.

The work has prompted some complaints from neighbors, according to city and county officials, but most stemmed from the loud music that the artists listened to.

"As long as it was supervised, which it was, it was fine," a spokesman for Supervisor Ed Edelman said. "The only problem was the noise, and the neighbors were worried about what was going on inside the building. I think it's been taken care of."

The graffiti artists themselves call the Pan Pacific their "wall of fame" because they were allowed to work on it without interference and because it is visible from heavily traveled Beverly Boulevard.

"I know it can't stay up forever," said a portly 21-year-old who identified himself only as Dream. "But I wouldn't be hurt (by its removal), 'cuz I'd know my stuff ran all summer."

The 40 or so youths involved in the project go by nicknames such as Scooby, Daze, Eaze and Soon.

They include whites, blacks and Latinos and come from neighborhoods as far away as Carson and the San Fernando Valley.

Their style is not indigenous to the Los Angeles area, according to Holley Barnet, a graduate student at UCLA whose research includes Chicano mural art.

Instead, she said, it reflects the influence of East Coast graffiti painters whose work has won some recognition as an avant-garde art form despite a crackdown by New York authorities determined to keep the spray paint off their subway cars.

"I know that people think it's a crime, that it's ignorance and stuff," said one of the Pan Pacific teen-agers, known only as Design. "People don't see it as an art form, but I hope after a while they'll see this is something different."

Art Reitzenstein, who operates a video rental and TV repair shop across the street, called much of the spray-painted work an eyesore, but added, "portions of it are nice."

But his neighbor, commercial photographer Elliot Gilbert, liked it so much that he commissioned a blue-and-yellow mural across the entire exterior back wall of his Curson Avenue studio.

"It's either this or 'U.S. out of Nicaragua,' " he said, citing a frequently seen slogan. "It spruces up the neighborhood, as far as I'm concerned."